REHMAN TRADERS, HYDERABAD VS The AUDIT OFFICER (FAT-VK), 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 2274 (2017)

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 29, 79, 80 & 83---Customs Rules, 2001, Rr.107(a), 110, 438 & 442---Making of assessment of goods---If assessment of the goods at the time of passing assessment order under S.80 of the Customs Act, 1969 and R.438 of the Customs Rules, 2001, had not been made with the correct application of the value available in data reservoir maintained by the "Pakistan Revenue Automation Ltd." under R.110 of the period given in R.107(a) of Customs Rules, 2001 or with the application of in-field Valuation Ruling; it could not be applied for the purpose of assessment after out of charge i.e. passing of clearance order under S.83 of the Customs Act, 1969 and R.442 of the Customs Rules, 2001, by virtue of bar laid down in S.29 of the Customs Act, 1969 and of the fact of becoming of Officer of Customs as "functus officio"---Customs Appellate Tribunal, could not allow the authorities to avoid a clear requirement of law---State and the citizens must be treated alike---Appellant/importer, could not be foisted with liability arising from gross inefficiency of Public Officials---Order passed during hierarchy of the Customs along with the show-cause notice was based on adequate breach of principles of natural justice and law, suffered from grave legal infirmities which was declared illegal ab initio and of no legal effect and set aside.

Messrs S.T. Enterprises v. Federation of Pakistan and 4 others 2009 PTD 467; Sikander Enterprises v. Customs Excise and Sales Tax Tribunal Karachi and 3 others 2008 PTD 1968; Asst. Collector v. Khyber Election Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898; Rose Color v. Chairman, CBR 2013 PTD 813; 1994 CLC 1612; 1990 PTD 29; 2005 PTD 23; Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Ltd. 2007 PTD 250; Xen Shahpur Division v. Collector of Sales Tax 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

Nadeem Ahmed Mirza for Appellant.

Abdul Hafeez Khatri, D.S, along with Abdul Latif Sher, Inspector for Respondents.

Date of hearing: 15th November, 2017.

JUDGMENT

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).--Through this Order, I intend to dispose of Appeal bearing No.H-325/ 2017 directed against Order-in-Original No. 03/2017 dated 07.01.2017 passed by Collector of Customs, Adjudication, Quetta (here-in-after to be referred as respondent No. 4).

2.Briefly facts of the case are that, the appellant imported a consignment of Samsung TV Monitor Panels falling under HS Code 8529.9090, Refrigerators, Washing Machines, Juicer Blenders and Microwave Oven, vide invoice dated 20.12.2014 and B/L dated 25.12.2014 from UAE, which he delivered to his clearing agent namely A.R.W. Enterprises, Hyderabad, C.H.A.L No. 4196, for transmitting Goods Declaration (here-in-after to be referred as GD) under the provision of Section 79(1) of Customs Act, 1969 (here-in-after to be referred as Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (here-in-after to be referred as Rules) with the MCC of Hyderabad, which he did on the basis of import documents with the exception of transmitting HS Code 8528.7212 meant for Television other than LCD/LED as against actual for panel/screen 8529.9090 and after obtaining pay Order from the appellant deposited upfront duty and taxes of Rs. 1,984,986.00 on 02.01.2015 consequent to which GD was numbered as KCSI-HC-179 dated 02.01.2015, which was selected for examination under Section 198 and Rule 435 ibid. The subordinate of the Deputy Collector of Customs, Dry Port, MCC of Hyderabad (here-in-after to be referred as respondent No. 2) conducted the examination and confirmed the declaration of imported goods as "Complete Panel Screen" and posted that in the reservoir of the GD. The Assessing Officer a subordinate of respondent No. 2 upon receipt of that on his desktop passed assessment Orders dated 03.01.2015 under Section 80 and Rule 438 of the Act/Rules in the capacity of adjudicating authority defined in Section 2(a) of the Act in exercise of the powers vested upon him through SRO-371(I)/2002 dated 15.06.2002 against each size of LED panels with the application of identical value of the imported product available in the valuation data reservoir maintained by PRAL under Rule 110 of the period given in Rule 107 (a) of Rules at US$ 70.80/pc for 32H411, US$ 225/pc for 55H8500 US$ 117/pc for 40H4203, 40H5100, 40H5270, 40H6300 & 40H4200 with the remarks "as per data" and transmitted view message dated 05.01.2015 for payment of additional amount of duty and taxes of Rs. 739,003.00 in addition to paid upfront at the time of filing GD, which appellant paid on even date vide cash No. A-HCSI-000001-05012015. Consequent to which the inbuilt authority of WeBOC passed clearance Order as contemplated in section 83 and Rule 442 of the Act/Rules. The clearing agent after obtaining delivery from the Dry Port transported the goods to the warehouse of the appellant. After lapse of more than about 9 months the Audit Officer (FAT-VK), Director Audit, Customs and Petroleum, Karachi (here-in-after to be referred as respondent No. 1 conducted audit of the received revenue by the Collectorate and prepared audit observation No. 09 dated 25.08.2015 stating inter alia that "upon examination of receipt maintained by the Deputy Collector Customs, Dry Port , Hyderabad for the financial year 2014-2015, it was observed that Messrs Rehman Traders imported Samsung LED Monitors , 32", 40" and 55" vide GD No. H-0179 dated 02.01.2015 were assess @ lower than the rate fixed Valuation Ruling No. 462/2012 issued by Customs Valuation, Karachi vide No. Misc/07/2009-VII dated 06.07.2012 fixing the value of 32,40 and 55 LED Television "Branded" bearing PCT heading 8528.7212 for US$.260.97, 483.90 and US$.1260.58/pc respectively if imported from Far East, Middle East and China. This resulted into loss of government revenue of Rs. 4,291,248.00 as worked out in the attached statement" to respondent No. 2, for comments/reply. Instead he referred that to The Assistant Collector (Audit), Dry Port MCC, Hyderabad, (here-in-after to be referred as respondent No. 3) who forwarded that vide letter dated 18.09.2015 to the appellant through which he started "advising him to pay the differential amount as pointed out by the audit or clarify your position within seven (07) days of the receipt of this letter, so that the audit observation may be settled. Non receipt of your response shall be presumed that the observation is in accordance with law and a demand of Rs. 4.291 million shall be enforced". The consultant of the appellant replied the audit observation vide letter dated 30.09.2015, through which he challenged the powers / jurisdiction of respondent No. 1 and his observation being contrary to the fact of the case and Valuation Ruling dated 06.07.2017, which has to be read with corrigendum dated 31.07.2012 and requested him to forward the reply of audit observation to respondent No. 1 with the advice to withdraw the observation being of no substance and in derogation of the Act/Rules. The respondent No. 3 kept the reply in dormant without any action and after lapse of about one year framed contravention report based on Audit Observation and forwarded that to respondent No. 4, who prepared show-cause notice narrating the fact and applicable provision of the Act/Rules as were communicated through contravention report. The purported show-cause notice was not intentionally and willfully served on the appellant as per the contemplation of Section 215 of the Act. Hence, no reply what-soever was submitted by the appellant and respondent No. 4 passed Order-in-original dated 07.01.2017 which was also not served in terms of Section 215 of the Act and was kept as guarded secret only for denying defense to the appellant despite guaranteed under the provision of Customs Act, 1969 and 10A of the Constitution of Pakistan. The passing of Order by respondent No. 4 came into knowledge of the consultant on 23.02.2017 during the hearing at Customs Appellate Tribunal, Karachi, he immediately informed the appellant and asked him to obtain the copy of show-cause notice and Order-in-Original, which he obtained from the office of respondent No. 4 after lot of pursuance. The respondent No. 4 through the said impugned Order held the charges levelled in the show-cause notice as established. Paras 19 (i) & (ii), which are reproduced for easement:-

"19(i) : I have carefully examined the case record , written and oral submission by the department and arrived at the conclusion that full opportunity was given to be heard but no one appear from the defendant's side and no written reply of Show-Cause Notice has been sent by them so far . The departmental representative reiterated the contention /charges levelled against Messrs Rehman Traders, Hyderabad in the contravention report as well as in Show-Cause Notice and he further that the charges against the unit are established. Therefore the case cannot be kept pending for indefinite period.

(ii) In view of the above fact, the charges levelled in the show-cause notice are established , therefore, I Order to recover the amount of Rs. 4,291,248/- from M/s. Rehman Traders, Hyderabad for the violation of Sections 32(1)(2) and 79(1) of the Customs Act, 1969 read with Sections 3 and 6 of the Sales Tax Act, 1990 , Section 148 of the Income Tax Ordinance, 2001. A penalty of Rs. 500,000/- (Rupees Five hundred thousand) only is also imposed on the importer in terms of clauses 14 and 45 of Section 156(1) of the Customs Act, 1969.

3.The appellant challenged the vires of the above Order through instant appeal and Consultant/Advocates of the appellant on the date of hearing argued the case strictly in line with the grounds incorporated in memo. of appeal and prayed for setting aside of the Order passed by the forum below and appeal be allowed as prayed.

4.No cross objections under subsection (4) of Section 194A of the Customs Act, 1969 have been submitted by either of the respondents within the stipulated period prescribed therein. However, on the date of hearing submitted comments, which are made part of the case for the sake of justice and fair play. In addition the representatives of the respondents forcefully defended the Order passed by respondent No. 4 being correct in facts and law. Therefore, need not to be disturbed and be maintained while dismissing the appeal as of no substance and of legal effect.

5.Heard and perused the record and relied upon documents / judgments by the appellant's, it is felt vital and appropriate to dilate upon the moot point of the case, which is as alleged by respondent No. 1 that the respondent No. 2 and his subordinates allowed clearance of purported Televisions without application of value determined by the Director, Directorate General of Valuation under the provision of Section 25A of the Customs Act, 1969 through Valuation Ruling No. 462/2012 dated 06.07.2012. Upon going through the examination report and assessment sheets/notes I am unable to endorse the formed opinion of respondent No. 1 as these nowhere confirms that the appellant imported LED Television instead were "T.V. Monitor with complete panel screen" falling under HS Code 8529.9090. Panel screen is just one of the part of LED Television, which cannot be made operational for receiving/displaying images/sound, unless integral parts namely (i) PC Board (ii) Tee Con (iii) Power Supply (iv) Back Cover (v) Stand (vi) Remote Control with Battery and (vii) Speakers are installed. Hence, LED Panel (Screen) sans vital integral parts cannot be termed through any stretch of imagination/definition as television, which falls under HS Code 8528.7211 not 8528.7212 or 8529.9090. The respondents read the Valuation Ruling No. 462/2012 dated 06.07.2012 in isolation instead in conjunction with corrigendum dated 31.07.2012. None of the respondents bothered to go through corrigendum dated 31.07.2012 through which the Director, Directorate General of Valuation amended/corrected the PCTs of all the five rows of Table-B of Ruling containing erroneous PCT of LCD Television as 8528.7212 to be read as 8528.7211, whereas PCT of LED Television was maintained as 8528.7212 despite irrelevant as both LCD and LED television are akin to each other with the exception of display technology i.e. in LED Television stands for "light emitting diodes," differs from general LCD TVs in that LCDs use fluorescent lights while LEDs use those light emitting diodes. Also, the placement of the lights on an LED TV can differ. The fluorescent lights in an LCD TV are always behind the screen. Both are being classified under PCT 8528.7211 in Pakistan Customs Tariff 2017-18. The lack of knowledge of the technology caused mentioning of erroneous PCT in Table-C of the Ruling and remained uncorrected/amended through corrigendum dated 31.07.2012, which created confusion for the respondent No. 1, who issued audit observation on wrong premise, resulting into framing of subsequent contravention report, by respondent No. 2, on the basis of which show-cause notice/ Order-in-original was issued/passed by respondent No. 4. Rendering these without lawful authority and as such void and ab-initio, by virtue of the fact that the appellant had not imported either LCD or LED Televisions falling under the impugned ruling, instead one of the replacement part falling under PCT 8529.9090, for which no Valuation Ruling was infield and assessment has to be made on the basis of value of identical goods as contemplated in Section 25(5) of the Act available in the data reservoir maintained by the PRAL under Rule 110 of the period given in Rule 107(a) of the Rules, in adherence of which the competent authority passed the assessment Order dated 03.01.2015.

6.It is also well settled law that if assessment of the goods at the time of passing Assessment Order under Section 80 and Rule 438 of the Act/Rule had not been made with the correct application of the value available in data reservoir maintained by the PRAL or with the application of in field Valuation Ruling, it cannot be applied for the purpose of assessment after out of charge i.e. passing of clearance Order under Section 83 and Rule 442 ibid by virtue of bar laid down in Section 29 of the Act and of the fact of becoming of Officer of Customs as "functus officio" as held by the Hon'ble High Court of Lahore in 2009 PTD 467 Messrs S.T. Enterprises v. Federation of Pakistan and 4 others that, "Valuation Ruling are estimate, if the same are not followed at the time of earlier appraisement it cannot be used against an importer which has already appraised and has been made out of charge by the authorities" and High Court of Sindh in 2008 PTD 1968 Sikander Enterprises v. Customs Excise and Sales Tax Tribunal, Karachi and 03 others, that "After disposal of the imported second hand clothes in the very year to assess the value of the goods on presumptive evidence, was beyond the scope of section 25 of Customs Act, 1969 .. Even otherwise, after clearance of the goods and removal of consignment from customs area, Customs Authorities were functus officio to reopen the case again as it had become past and closed transaction".

7.Upon perusal of the show-cause notice, I have also noticed that respondent No. 4 invoked Sections 3 and 6, of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001, in total ignorance of the fact that Section 3 indeed being a charging Section cannot be invoked by anyone other than an Officer of Inland Revenue whereas Section 6 is a machinery Section that lays down the procedure relating to collection of Sales Tax at the import stage by the customs authorities hence cannot be used to charge anyone for an offence. Likewise, invoked Section 148 of Income Tax Ordinance, 2001 is also a machinery Section akin to Section 6 of Sales Tax Act, 1990. These Sections are independent and cannot be used to invoke a charge. Issuing show-cause notice under these sections render it void, ab-initio and of no legal effect as held in Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector of Customs 2002 MLD 130, Atlas Tyres v. Addl. Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs.

8.For further crystallizing, the issue relating to recovery of short paid sales tax and income tax, I am indebted to peruse Section 30 of Sales Tax Act, 1990 and Section 228 of the Income Tax Ordinance, 2001 and have observed that the legislature appoints under the said Sections different organs of the Federal Board of Revenue as Officer of Inland Revenue for exercising powers under the respective Sections of the Act/Ordinance, delegated through statutory notifications or under Section 207 of the Income Tax Ordinance, 2001. In these Sections neither Officers of Clearance Collectorate nor respondent No. 4 figures anywhere nor in charging Section 11 of the Sales Tax Act, 1990 or Section 162(1) of the Income Tax Ordinance, 2001. Therefore, the respondents Collectorate under no circumstances assume jurisdiction in the matter of Sales Tax / Income Tax. Therefore, neither respondent Collectorate nor respondent No. 4 are empowered to lay hands on the matter falling within the ambit of Section 11 of the Sales Tax Act, 1990 and Section 162 (1) of the Income Tax Ordinance, 2001. These Sections empowers the Officers of Inland Revenue / Commissioner of Income Tax to initiate adjudication / recovery proceeding for the short collected/paid Sales Tax and Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. For proceeding for these types of recovery proceeding have to be carried out under the aforesaid provision of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001. The opinion formed by me is well assisted by the judgment reported at 1994 CLC 1612, 1990 PTD 29, 2005 PTD 23 and 2007 PTD 250 and in titled as Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Ltd., wherein it has been held that "There is a clear distinction between the charging provision of Statute and the machinery part thereof. It is axiomatic that mode of manner of recovery does not alter, the nature of tax nor a tax can be introduced or import by implication. In 2008 PTD 1973 Xen Shahpur Division v. Collector of Sales Tax (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad, for clarity of the Rule of Interpretation of Statute, golden principle was outlined in so many words reading as "That fiscal law is to be applied with full authority and its natural meaning, one has to look merely at what is clearly said and there is no room for any intendment, neither there is equity about a tax nor presumptions as to tax,nothing is to be read in, nothing is to be implied, one can only look fairly at the language used" The Hon'ble Supreme Court of Pakistan in reported judgment 2006 SCMR 129 titled as DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others held that:--

"If the law have prescribed method for doing a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or retaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted--- each and every words appearing in a Section is to be given effect and no other word is to be rendered as redundant or surplus - when the legislature required the doing of a thing in a particular manner then it is to be done in that manner and all other manner or modes of doing or performing that things are barred -- if the doing of a thing is made lawful in a particular manner the doing of that thing in conflict with the manner prescribed will be unlawful as per maxim "Expression facit cessare tacitum"

9. Being a custodian of law, this court cannot allow the Respondents to avoid a clear requirement of law, the state and the citizens must be treated alike. The Appellant cannot be foisted with liability arising from gross inefficiency of public officials and in case the Government is so minded. Rules confer adequate powers to recover losses suffered through negligence or breach of statutory obligations. By getting the strength what has been discussed herein above, particularly the interpretation of law and legal propositions and observations made thereon and by following the ratio decidendi observed by the Superior Courts, I, therefore, hold that order passed during hierarchy of the customs along with the show-cause notice is based on adequate breach of natural justice and law, suffers from grave legal infirmities is declared illegal, ab initio and of no legal effect on various accounts and accordingly set-aside and the appeal is allowed with no order as to cost.

10.Judgement passed and announced accordingly.

HBT/2/Tax(Trib.) Appeal allowed.